As a result of the British Government outsourcing its responsibility to supervise the large banks to industry groups and not holding bankers to account, the Royal Bank of Scotland Group plc (ADR)(NYSE:RBS) (LON:RBS) is in danger of failing within ten years, says a new book.


Book details lavish spending, irresponsible behavior as government regulators let banks write the rules

Shredded: Inside RBS, The Bank That Broke Britain, written by the financial journalist Ian Fraser and recently reviewed by Britian’s Independent newspaper, says the bank has a £100 billion pound financial “black hole” caused by “five broad areas of alleged criminality and wrongdoing.”

The criminal wrongdoing includes “duping” investors who invested £12 billion pounds in RBS just before the bank derivatives crash of 2008, manipulation of Libor and foreign exchange markets, now under criminal investigation, and improper selling of financial products, including payment protection insurance which did not work as described.

The book heaps criticism on Royal Bank of Scotland Group plc (ADR)(NYSE:RBS) (LON:RBS) senior managers but says the real villains are the regulators and government officials who ignored criminal behavior and egregious mis-use of bank funds.

“The Treasury, the FSA [Financial Services Authority] and the Bank of England all turned a deaf ear to the complaints from the banks’ millions of ‘victims’ and paid scant heed to the overall balance-sheet strength – capital, liquidity and asset quality – of British banks.

“And, at various stages between 1988 and 2008, British politicians also outsourced critical aspects of banking regulation and supervision to the private sector body, the Basel Committee on Banking Supervision, which enabled the bankers to write their own rules.”

Bank funded jet setting lifestyle while Rome burned – RBS

The book considers the stewardship of former Royal Bank of Scotland Group plc (ADR)(NYSE:RBS) (LON:RBS) chief Fred Goodwin, who is described as using bank funds to lavish a jet setting lifestyle on himself and his wife.  Under his command, the bank purchased a £20 million pound assault Falcon 900EX executive jet complete with a private sleeping compartment for Goodman. The book says executives didn’t like traveling on the plane due to Goodwin’s poor social skills and, when he would recline in the bedroom, it blocked the only route to the single bathroom on the plane, leaving other passengers to “cross their legs” on long flights while Goodwin slept.  Goodwin used the plane so much former RBS chairman George Mathewson “almost had to plead” with Goodwin to use it for actual bank business, according to the book. The UK tax authority, investigating Goodwin’s tax returns, wanted to claim the plane as “benefits in kind” since Goodwin and his wife were using it so often for personal trips.

Goodwin Formula One fan

In the book, the lavish spending Goodwin engineered to support his ego and personal image was absurd. “The amounts of money that were wasted on Formula One were shocking,” he said. “The bank spent about £28m in the first year of the Williams sponsorship.  There was no logic to it at all – it was just a vanity thing for Fred and because he liked motor sport.”

After a rabbit hole of criminal activity occurred, the bank required a bailout of £45.5 pounds, which is now in danger of not being returned to tax payers, writes Frazer. No “C” level executive at Royal Bank of Scotland Group plc (ADR)(NYSE:RBS) (LON:RBS) has been charged with criminal wrongdoing, but mid-level trading executives have been charged in various market manipulation cases.